Quarterly report pursuant to Section 13 or 15(d)

Treasury Stock and Share Based Awards

v3.20.2
Treasury Stock and Share Based Awards
6 Months Ended
Jun. 30, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Treasury Stock and Share Based Awards

11.

Treasury Stock and Share Based Awards

Treasury Stock — Treasury stock represents shares of common stock repurchased or withheld by the Company and not yet retired. The Company has applied the cost method in recording its treasury shares.  Below is a summary of the Company’s treasury stock activity for the six months ended June 30, 2020:

 

 

 

Number of

 

 

 

 

 

 

 

Treasury

 

 

 

 

 

 

 

Shares

 

 

Cost

 

Balance at January 1, 2020

 

 

4,711,859

 

 

$

81,567

 

Restricted stock withholdings (1)

 

 

94,882

 

 

 

2,798

 

Restricted stock forfeitures

 

 

27,723

 

 

 

 

Balance at June 30, 2020

 

 

4,834,464

 

 

$

84,365

 

 

(1)

The Company withheld restricted shares as a result of the election by certain employees to satisfy their tax liabilities upon vesting in restricted stock and restricted stock units.  The Company determined the number of shares to be withheld based upon market values ranging from $8.03 to $32.12 per share.

As of June 30, 2020, the Company had no plans to retire any shares of treasury stock.

Restricted Stock – During the six months ended June 30, 2020, the Company granted 535,231 shares of restricted stock to employees. The fair value of the restricted stock granted was determined based on the market value of the Company’s common stock on the dates of grant, which ranged from $8.39 to $32.12 per share. The Company assumed forfeiture rates for the restricted stock awards that ranged from 0% to 10%.  The restricted stock awards vest over periods ranging from one to four years. The recipients of restricted stock are entitled to receive non-forfeitable dividends and to vote their respective shares, however, the sale and transfer of the restricted shares is prohibited during the restriction period.

Below is a summary of restricted stock activity for the six months ended June 30, 2020:

 

 

 

Shares of

 

 

Weighted

Average

 

 

 

Restricted

 

 

Grant Date

 

 

 

Stock

 

 

Fair Value

 

Outstanding at January 1, 2020

 

 

783,823

 

 

$

37.53

 

Granted

 

 

535,231

 

 

$

25.22

 

Vested

 

 

(307,107

)

 

$

35.58

 

Forfeited

 

 

(27,723

)

 

$

36.11

 

Outstanding at June 30, 2020

 

 

984,224

 

 

$

31.49

 

Unvested restricted stock at June 30, 2020

 

 

984,224

 

 

$

31.49

 

 

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

Compensation expense recognized during the period

 

$

5,403

 

 

$

4,869

 

Fair value of restricted shares that vested during the period

 

$

8,700

 

 

$

7,630

 

Income tax benefit recognized upon vesting of restricted stock awards

 

$

2,620

 

 

$

1,473

 

 

As of June 30, 2020, the estimated remaining unrecognized compensation expense related to unvested restricted stock awards was $20,390 and the weighted average period over which this remaining compensation expense will be recognized is approximately three years.

Impact of 2020 Restructuring Plan - During June 2020, as part of the Company’s employee-related restructuring actions discussed in Note 2, the vesting period for certain share based awards will be accelerated on a pro-rata basis based upon the grant dates and each employee’s separation date.  The Company considers the accelerated vest of these awards to be a modification under ASC Topic 718 Stock Compensation.  Based on the terms of the severance agreements, the Company estimated the number of awards expected to vest at each employee’s expected separation date and revalued such awards based on the modification date, or the date on which employees were notified of the 2020 Restructuring Plan.  The modification date fair value per share was $15.95.   The Company recorded incremental compensation expense of approximately $521 related to these modifications, which is reflected in restructuring costs on the Company’s condensed consolidated income statement.  

Restricted Stock Units – During the six months ended June 30, 2020, the Company granted restricted stock units representing 436,681 hypothetical shares of common stock to employees. The restricted stock units vest based on a combination of financial performance factors and continued service. The financial performance factors are based on an implied equity value concept that determines an internal rate of return (“IRR”) during the two fiscal year periods ending December 31, 2021 based on a formula utilizing a multiple of Adjusted EBITDA subject to certain adjustments as specified by the Compensation Committee prior to the grant date. The financial performance factors for the restricted stock units have a threshold, target and maximum level of payment opportunity and vest on a prorata basis according to the IRR achieved by the Company during the performance period. If the IRR for the two-year period is at least 6%, which is the threshold, one-third of the maximum restricted stock units vest. If the IRR for the two-year period is at least 8%, which is the target, two-thirds of the maximum restricted stock units vest. If the IRR for the two-year period is at least 14%, which is the maximum, 100% of the maximum restricted stock units vest. Grantees are eligible to receive a ratable portion of the common stock issuable if the IRR is within the targets previously noted. Further, as an example, if the Company achieves an IRR equal to 11%, the number of restricted stock units that shall vest will be greater than the target but less than the maximum number that would have vested had the Company achieved the highest IRR.  All restricted stock units granted during 2020 will vest subject to an additional two-year service requirement and will be paid in the form of common stock if the participant continues to provide services through the fourth anniversary of the grant date. Restricted stock unit award participants are eligible to receive dividend equivalent payments from the grant date if, and at the time that, the restricted stock unit awards vest.  

Below is a table summarizing the potential number of shares that could vest under restricted stock unit awards granted during the six months ended June 30, 2020 at each of the three target levels of financial performance (excluding forfeiture assumptions):

 

 

 

Number of

 

 

 

 

 

 

 

Shares

 

 

Value at

 

 

 

Vesting

 

 

Grant

 

at IRR of at least 6%

 

 

190,707

 

 

$

6,125

 

at IRR of at least 8%

 

 

286,060

 

 

$

9,188

 

at IRR of at least 14%

 

 

436,681

 

 

$

14,026

 

 

Due to the fact that the IRR for the two-year performance period could not be determined at the time of the 2020 grant, the Company estimated that the most likely outcome is the achievement of the target IRR level. The fair value of the restricted stock unit awards was determined based on the closing price of the Company’s common stock on the date of grant, which was $32.12 per share. The Company assumed a forfeiture rate of 5% for the restricted stock unit awards. If during the service period, additional information becomes available to lead the Company to believe a different IRR level will be achieved for the two-year performance period, the Company will reassess the number of units that are expected to vest for the grant and adjust its compensation expense accordingly on a prospective basis over the remaining service period.

 

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

Number of restricted stock unit awards that vested during the period

 

 

117,500

 

 

 

88,074

 

Fair value of restricted stock unit awards that vested during the period

 

$

3,634

 

 

$

3,550

 

Accumulated dividends paid upon vesting of restricted stock unit awards

 

$

563

 

 

$

375

 

Compensation expense recognized during the period

 

$

3,029

 

 

$

1,777

 

Income tax benefit recognized upon vesting of restricted stock unit awards

 

$

526

 

 

$

170

 

 

 

As of June 30, 2020, the estimated remaining unrecognized compensation expense related to the outstanding restricted stock unit awards was $15,150. The weighted average period over which this remaining compensation expense will be recognized is approximately three years. As of June 30, 2020, the Company had restricted stock units outstanding that represented a total of 990,121 hypothetical shares of common stock, net of forfeitures, assuming an IRR of 9.3% was achieved for the 2017 grants, an IRR of 8.6% was achieved for the 2018 grants and the maximum IRR level is achieved for all other grants outstanding.